MPC member Martin Weale said the Bank needed to study the case for a rate cut

A rate cut to boost the economy would be preferable to more quantitative easing, a Bank of England policymaker said today.

Martin Weale said that as long as he was sure banks would not cut lending, he would cut rates below their long-standing record low of 0.5 per cent rather than plough more money into asset purchases.

'If it were clear that the interest rate could be reduced ... without finding some banks got themselves into a position where they had to reduce lending because of the effects of an interest rate cut on their profits (and) if it were clear a reduction in interest rates would be like all other reductions in the interest rate, I think I would probably prefer that to more QE, if I was choosing between them,' Weale told the Scottish Herald.

Weale added that he did not see a case for further monetary stimulus 'at the moment', and his view will have been substantiated by revised growth figures today which showed the UK recession is not as bad as feared.

British gross domestic product contracted by 0.5 per cent between April and June - and not by 0.7 per cent as originally estimated. The revision will take pressure off the Bank's policymakers to take action on the economy.

But the figures still represent the biggest quarter-on-quarter fall for more than three years and confirm that the economy is stuck in the longest double-dip recession since the 1950s.

Weale has also warned that a rate cut might have 'perverse effects', such as 'weakening the financial position of certain banks - the interest rates on their deposits - or money market funds'.

The Bank of England's defence of its QE programme drew an angry response from a leading pension group yesterday

As a result he said the Bank needs to 'establish whether the effects of an interest rate reduction would be positive before we might do it'.

Weale's comments come the day after the row over the effects of quantitative easing on pensions re-erupted.

The Bank defended its money printing scheme in a report released today, which said that the effect of QE on pensions is broadly neutral - even though it has hit annuity incomes.

The report claimed that pension savers are no worse off from the Bank's gilt-buying because it has boosted equity prices and the value of pension funds will have gone up, offsetting the fall in income they will get when converting to an annuity.

The report also concluded that because QE has pushed up gilt prices, it has averted an economic crisis.

But leading pensions expert and director-general of Saga, Dr Ros Altmann, questioned the report's figures and argued that the net effect of QE on pensioners has been drastically negative.

Dr Altmann said, 'The Bank fails to properly address the impact of QE on a vital demographic group of the UK economy – in particular the 21million over 50s who have been negatively impacted.’

Back in May the Bank also found itself defending the QE scheme, as deputy governor Charlie Bean told pension fund bosses that fund values had not been cut by asset-purchasing, arguing that it had raised share prices.